Even the most reliable manufacturers have instances where products malfunction. Although product liability cover is not compulsory in many countries, the UK Consumer Protection Act 1987 and the Electronic Commerce Directive on Product Liability have mandated that many suppliers obtain some form of liability protection.
Nevertheless, regardless of any governmental influence, the potential for high profile litigation compels many businesses to obtain liability insurance.
For example, a simple mechanical failure can result in class action lawsuits against automobile companies. Contamination is a common problem for those involved in food services. However, the perils of product liability apply to more than just multinational conglomerates.
Any individual involved in the construction, repair, and sale of products can be liable for damages resulting from mistakes or negligence.
A strong product liability policy will protect your business against the following litigation:
- Manufacturing defects
- Spoilage expenses
- Legal fees
- Safety claims
- Medical treatment claims
It is important to note the distinction between a manufacturing defect and a poor quality product. Product liability coverage does not protect against a deliberately bad design. For instance, a chair made with uneven legs may constitute a design defect, as the chair was not intended to be stable.
On the other hand, if a chair’s legs were designed to be sturdy but were not bolted on correctly, it would constitute a manufacturing defect and be covered under a liability policy. It is important to go over such exclusions with your insurance agent before signing on for a particular liability plan.
A strong quality control system will help guarantee product safety and cut the cost of your insurance premiums. In addition to minimising cost, it will ensure that if a defect does occur it is not attributable to poor design and the negligent marketing of a badly designed product.